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Test your basic knowledge |
AP Microeconomics
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Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Normal Goods
Constant cost industry
Monopolistic competition long-run equilibrium
Inferior Goods
2. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply
Income Elasticity
Average Fixed Cost (AFC)
Determinants of Supply
Average Variable Cost (AVC)
3. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Price Elasticity of Supply
Law of Diminishing Marginal Utility
Monopoly
Price inelastic demand
4. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Negative externality
Law of Demand
Resources
Positive externality
5. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Monopsonist
Marginal Revenue Product (MRP)
Profit Maximizing Resource Employment
Private goods
6. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good
Implicit costs
Average Product of Labor (APL)
Law of Supply
Spillover benefits
7. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Productive Efficiency
Producer surplus
Price discrimination
Least-Cost Rule
8. Ed = 8 - infinite change in demand to price change
Economics
Perfectly elastic
Demand for Labor
Least-Cost Rule
9. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Spillover benefits
Utility Maximizing Rule
Non-collusive oligopoly
Surplus
10. Costs that change with the level of output. If output is zero - so are TVCs.
Absolute Advantage
Decreasing Cost industry
Total variable costs (TVC)
Dead Weight Loss
11. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Explicit costs
Resources
Income Effect
Free-Rider Problem
12. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Fixed inputs
Marginal tax rate
Price elastic demand
Determinants of Labor Demand
13. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Law of Diminishing Marginal Utility
Normal Profit
Complementary Goods
Monopolistic competition
14. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.
Total Revenue
Diseconomies of Scale
Price elasticity
Perfectly inelastic
15. Exists at the point where the quantity supplied equals the quantity demanded
Price Ceiling
Market Equilibrium
Natural Monopoly
Profit Maximizing Rule
16. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Marginal Revenue Product (MRP)
Increasing Cost Industry
Subsidy
Monopoly long-run equilibrium
17. Product demand - productivity - prices of other resources - and complementary resources
Positive externality
Cartel
Marginal Product of Labor (MPL)
Determinants of Labor Demand
18. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Utility Maximizing Rule
Positive externality
Price discrimination
Subsidy
19. 0 < Ei < 1
Necessity
Economic Growth
Spillover costs
Monopoly long-run equilibrium
20. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Consumer surplus
Cartel
Marginal Analysis
Economics
21. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Spillover costs
Absolute Advantage
Productive Efficiency
Perfectly elastic
22. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Perfect competition
Determinants of Demand
Utility Maximizing Rule
Economies of Scale
23. The additional benefit received from the consumption of the next unit of a good or service
Marginal Analysis
Price floor
Marginal Benefit (MB)
Marginal Productivity Theory
24. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Price elasticity
Normal Profit
Excise Tax
Perfectly inelastic
25. The difference between total revenue and total explicit costs
Profit Maximizing Resource Employment
Accounting Profit
Collusive oligopoly
Average Total Cost (ATC)
26. The output where ATC is minimized and economic profit is zero
Necessity
Break-even Point
Average Product of Labor (APL)
Marginal tax rate
27. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption
Long Run
Shutdown Point
Oligopoly
Private goods
28. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Long Run
Consumer surplus
Economic Profit
Law of Increasing Costs
29. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Economic Growth
Perfect competition
Average Product of Labor (APL)
Production function
30. A good for which higher income increases demand
Normal Goods
Variable inputs
Explicit costs
Cartel
31. A good for which higher income decreases demand
Profit Maximizing Rule
Inferior Goods
Average Total Cost (ATC)
Price discrimination
32. Exists if a producer can produce more of a good than all other producers
Determinants of Supply
Allocative Efficiency
Absolute Advantage
Perfect competition
33. Ed = 0 - no response to price change
Scarcity
Fixed inputs
Perfectly inelastic
Law of Demand
34. ATC = TC/Q = AFC + AVC
Constrained Utility Maximization
Law of Increasing Costs
Average Total Cost (ATC)
Opportunity Cost
35. The rational decision maker chooses an action if MB = MC
Monopoly
Marginal Analysis
Marginal Benefit (MB)
Normal Profit
36. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Demand for Labor
Derived Demand
Consumer surplus
Productive Efficiency
37. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Profit Maximizing Rule
Excise Tax
Law of Demand
Natural Monopoly
38. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand
Relative Prices
Short run
Negative externality
Economic Profit
39. The sum of consumer surplus and producer surplus
Total Welfare
Surplus
Determinants of elasticity
Marginal tax rate
40. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Law of Demand
Unit elastic demand
Market Economy (Capitalism)
Price discrimination
41. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Determinants of elasticity
Collusive oligopoly
Absolute Advantage
Surplus
42. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Profit Maximizing Rule
Cross-Price Elasticity of Demand
Law of Supply
Accounting Profit
43. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Allocative Efficiency
Price elastic demand
Break-even Point
Surplus
44. Ei = (%dQd good X)/(%d Income)
Price elastic demand
Long Run
Shortage
Income Elasticity
45. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Spillover costs
Least-Cost Rule
Determinants of Supply
Implicit costs
46. Occurs when LRAC is constant over a variety of plant sizes
Shutdown Point
Constant Returns to Scale
Average Variable Cost (AVC)
Total variable costs (TVC)
47. The most desirable alternative given up as the result of a decision
Total Product of Labor (TPL)
Determinants of Labor Demand
Constant Returns to Scale
Opportunity Cost
48. The marginal utility from consumption of more and more of that item falls over time
Law of Increasing Costs
Collusive oligopoly
Unit elastic demand
Law of Diminishing Marginal Utility
49. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Absolute Advantage
Comparative Advantage
Negative externality
Specialization
50. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Normal Goods
Income Elasticity
Four-firm concentration ratio
Explicit costs